LONDON (Reuters) - Over-reliance on offshore wind farms to
meet European renewable energy targets will lead to supply
problems and drive up costs for investors, according to a new
report by the Cambridge Energy Research Associates.

The European Union wants to generate a fifth of its energy
from renewable resources by 2020 but the majority of that will
likely have to come from wind turbines and the industry may not
be able to cope with the demand.

"Big things are expected of offshore wind but this
fledgling sector could be at risk given ongoing increases in
capital costs, especially if government subsidies do not keep
pace," said Matt Brown, CERA senior director and head of the
European power service.

"Further increases of 20 percent in offshore wind capital
costs over the next few years should be expected."

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CERA said capital costs could increase from 2,300 euros
($3,586) per kilowatt to 2,800 euros per kilowatt as a result,
because of increases in raw material and engineering costs.

The report says a lack of purpose-built installation
vessels to install the turbines could be a major problem for
wind farm developers.

"With this pinch point companies should consider investment
in installation vessels, as this part of the supply chain is
where the higher value will be found," Brown said.